The European market for logistics property has featured as an important component of the the boom in the European real estate markets. Demand is increasing beyond the ability of new supply to keep pace. This has sent transaction prices and rents on an upwards trajectory as yields for the asset class fall. Prof. Dr. Thomas Beyerle, Head of Research at Catella says that it’s only a matter of time before yields drop below the 4.00% threshold making it essential for investor to pay particular attention to potential regions. “An intelligent choice of location and accommodation, somewhere between availability of space, affordability and efficiency, is a problem faced by all market players,” says Beyerle. In the decision-making process, great importance should be attached to the interactions between these regions. Potential regions form the geographical backbone of development.”
Catella’s most research found that the average prime rent for logistics space in the 109 locations analysed is currently approx. €5.35/sqm per month. That’s a 4 percent gain over the past 12 months. Still, there are wide gaps, with space on offer at just €3.25/sqm in the Liège logistics region in Belgium to the most expensive logistics space around London Heathrow (€16.50/sq m). Additionally, rents in the logistics regions of the Scandinavian countries, Great Britain, Ireland and Switzerland are almost all higher than the European average. By way of comparison, in the first half of 2019, the average prime rent in Germany was approx. €4.99/sq m, i.e. below the European average.
In addition, Catella revealed that the average prime yield in the locations analysed is currently 5.66%, 43 basis points lower year-on-year. The yield gap with European office property is therefore only 1.4 percentage points. The most expensive logistics locations are London Heathrow and Berlin, both having a current prime yield of 4.00%. The prime yield in Berlin has fallen by 70 basis points within 12 months. Attractive yield opportunities above 7% are primarily to be found in the Baltic States and in Finland. Catella registered the highest prime yield, 9.25%, in the logistics location Oulu, Finland.
